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A Contra Expense Account is the reversal of relevant Expense Account on Income Statement . The most famous Examples are Purchase Returns, Purchase Allowance and Purchase Discount.  These are deducted from Total Purchases or Gross Purchases. 1. Purchase Returns Contra Expense Account Purchase Returns are the returning of goods by customers to suppliers due to defective goods or any other valid reasons it is an contra expense account, so it is deducted from total purchases on Income Statement / Statement of Profit And Loss Account. 2. Purchase Allowances Contra Expense Account Purchases allowance is the retaining of goods by customer as the seller offers a lower price than standard price due to minor defective in goods i.e., paint quality of table is not so good as required by the customer but he retains due to lower price and accept this offer, etc. It is also deducted from Gross Purchases. 3. Purchase Discount Contra Expense Acc...

Purchase Discount is the concession on the purchased price of goods given by the seller to the buyer when he makes payment before due date. It is a Purchase Discount and Direct Revenue for the buyer while it is a Sales Discount which is a Direct Expense for the Seller. It is also k now n as  Purchase Discou nt  Contra Expense Account . Purchase Discount Journal Entry For a buyer i.e. a company (XYZ) which purchases the goods Worth Rs. 50000 from supplier (ABC Company) for reselling purposes (Assuming 2% Discount was given):                                                  ABC Company        1000                                                   ...